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Financial crisis boosted fiduciary management - Kraneveld

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GLOBAL - The financial crisis has benefited fiduciary management, according to international pensions expert Peter Kraneveld.

In a discussion with IPE about the partnership between Italian foundation PensPlan and fiduciary manager APG/Cordares, Kranefeld explained: "The crisis has brought three issues to the fore, which are all working to the advantage of fiduciary management.

"First, more attention needs to be paid to due diligence. The smaller the pension fund, the harder that task becomes, but the larger it is, the more it can do apart from looking solely at rating agencies. The second issue is model risk, because a model may simply not work during crisis times. While larger pension funds can undertake research to chart this risk, smaller schemes often cannot do anything about it. And thirdly, risk management has become a lot more important. And all these issues are elements of fiduciary management," he noted.

Michael Atzwanger, managing director at PensPlan, agrees with Kranefeld's view as he commented: "The crisis has led to strategy reviews by institutional investors and has pushed them towards independent asset management."

Kranefeld argued fiduciary management is perhaps better suited to the current financial environment as unlike outsourcing, which is a simple commercial deal, fiduciary management is more encompassing and tries to solve various problems.

"It is the opposite of a pensions buyout because it will add to the sophistication of the investment process in order to improve the pension, which also means the sponsor keeps the shortfall risk," he said.

"In a buyout, the sponsor surrenders by selling its risks as well as the responsibilities and therefore makes sure the pension will never get better," he claimed.

Kraneveld believes there will be additional interest in fiduciary management on the back of the recent crisis but also points out that people's priorities are currently focused on their investment return.

Nevertheless, he is confident that once the crisis recedes, more cross-border fiduciary management partnerships will follow.

In early 2009, Dutch pension administrator and asset management company APG Group - which merged with fiduciary manager Cordares on 1 September 2008 - began its partnership with €1.6bn PensPlan, a foundation promoting and providing asset management services to pension funds in Italy's Trentino-South Tyrol region.